Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Find a Job
  • Home
  • Law, Transactions, & Risk Management
  • Business Entities, Corporate Governance & Ownership

Fat Man Strategy (Hostile Takeovers) - Explained

What is a Fat Man Strategy?

Written by Jason Gordon

Updated at March 10th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is a Fat Man Strategy?How is the Fat Man Strategy Used?

What is a Fat Man Strategy?

A fat man strategy is a tactic used by a target company to foil or prevent a hostile takeover. When this strategy is used, the target company defends or protects itself by buying the assets of another company or acquiring the company. When this happens, the target company is referred to as a "fat man" and becomes unattractive in a hostile takeover. The directors of the target company ensure that the acquisition of assets or business increases its debts or reduces the available cash of the target company.

Back To: BUSINESS ENTITIES, CORPORATE GOVERNANCE, & OWNERSHIP

How is the Fat Man Strategy Used?

When a target company uses a fast man strategy to foil a hostile takeover, it renders itself completely unattractive to the acquirer. Most times, the additional debts incurred by the target company in a bid to become a fat man are irreversible but at the same time protects it from a hostile takeover. A fat man strategy is often likened to a kamikaze defense strategy but slightly different from other kamikaze defense strategies. While the fat man strategy involves acquiring additional assets or company, other kamikaze strategies entail divesting of assets. There are no clear benefits of the fat man strategy given that the target company incurred damages and debt that are largely irreversible. Oftentimes, executing a fat man strategy does not sit well with most directors of a target company due to the disadvantages it offers. A major disadvantage of this strategy is that it must be executed before a hostile bid is tendered, hence, there would be no time to execute this strategy. There are other strategies a target company can use to foil a hostile takeover, this includes suicide pill, poison pill or scorched earth policy, these are better alternatives to the fat man strategy.

fat man strategy

Was this article helpful?

Yes
No

Related Articles

  • Chief Information Officer (CIO) - Explained
  • LLC Compensation - Explained
  • Board of Governors - Explained
  • Yellow Knight (Hostile Takeover Defense) - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand